medium · Private Equity & LBOs
A sponsor acquires a business with a $40M net pension deficit.
How should this be treated in the enterprise-to-equity bridge, and how does it affect PPA?
- It is added to the enterprise value to increase the purchase price.
- It is ignored in the equity bridge but included as an intangible asset in PPA.
- It is an asset step-up because the sponsor can now manage the plan more efficiently.
- It is a debt-like item that reduces equity value; in PPA, it is recognized as a liability at fair value.
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